ECONOMIC ISSUES

As noted earlier, the emphasis of the power generation industry in many sectors (e. g. Europe and North America) at the present time is the continued successful operation of existing plant, rather than the building of new plant. The main economic reason behind this position is the high capital cost of new plants, a degree of stagnation in demand, and the availability of cheap gas.

Table 2.2. Average generation costs ($US per kWh)

Generator

5% Discount

10% Discount

Nuclear

0.034

0.051

Coal

0.038

0.048

Gas

0.040

0.044

Data from Wilmer and Bertel (2000).

Operation of current plant will continue provided that they remain not only economic but also safe and environmentally compliant with regulatory guidelines. To be economic, a number of factors need to be considered and these are sector dependent. The plant may need to operate in a de-regulated market in competition with other generators. The economics will depend on electricity prices, which may be reducing, and also on other operating costs. These issues are discussed below. Clearly, overall costs have to be achieved against budget and kept to a minimum, without compromising safety of the plant.

The economic competitiveness of nuclear power plants has been the subject of several OECD studies (Wilmer and Bertel, 2000). These studies have analysed the projected costs of generating electricity compared with alternatives. In Wilmer and Bertel (2000), ‘levelled cost comparisons’ are presented from 12 countries, each providing information for at least one nuclear unit and one alternative. The costs were calculated making common assumptions. For nuclear plants, these included a 40-year lifetime and a 75% load factor. For gas-fired plants, the assumptions included the cost of replacing major equipment after around 20 years. The costs were levelised at 1997 costs.

Nuclear generating costs are the most sensitive to discount rates. The above Table 2.2 indicates that at the time of the study, nuclear power is competitive at 5% discount rates but loses its competitive margin at 10%.

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